March 19 (Reuters) - Spanish defence company Indra on Thursday said that Escribano Mechanical and Engineering (EM&E) had withdrawn from a potential transaction between the companies. The transaction
Spain's Indra says EM&E withdraws from potential acquisition
Overview of Indra, EM&E, and the Acquisition Withdrawal
Background of the Acquisition
March 19 (Reuters) - Spanish defence company Indra on Thursday said that Escribano Mechanical and Engineering had withdrawn from the possible acquisition of EM&E by Indra.
Stakeholders and Ownership Structure
The transaction had been a point of contention between state-owned fund SEPI, which owns a 28% stake in Indra, and Indra's chairman, Angel Escribano, who owns EM&E together with his brother Javier, who also sits on Indra's board.
EM&E in turn has a 14.3% stake in Indra, making it the second-largest shareholder behind SEPI.
Conflict of Interest and Government Involvement
SEPI's Concerns and Actions
SEPI had asked Indra on Wednesday to resolve a conflict of interest among shareholders before going further with the deal.
Government Response and Influence
Spanish news website El Confidencial reported this week that Spain's government had urged SEPI to use its influence to force Escribano's dismissal over the dispute.
Statements from Government Officials
The Spanish government was not aware of a conflict of interest when Escribano was appointed chairman, Deputy Prime Minister Maria Jesus Montero said in an interview on RTVE earlier on Thursday.
The Spanish government has been taking a more active role through SEPI in companies it considers strategic, helping to replace Telefonica's previous CEO Jose Maria Alvarez-Pallete with Marc Murtra, who previously chaired Indra.
Strategic Implications and Market Reaction
Indra's Industrial Strategy
Indra had previously said it was seeking an industrial partner in the defence industry and that EM&E would give it mass production capacity.
Market Response
Shares in Indra fell as much as 19% after the news but ended the day 12.3% lower.
Comments and Reporting
EM&E was not immediately available for comment.
(Reporting by Javi West Larrañaga; Editing by David Latona, Kirsten Donovan and Cynthia Osterman)
